Decarbonising transport: the latest on the UK’s new Net Zero Strategy for passenger vehicles

With just over one week until COP26, the UK Government has announced its new Net Zero Strategy, which sets out plans to reduce greenhouse gas emissions to reach the Government’s net zero commitments by 2050. The Strategy outlines key commitments intended to facilitate the transition to electric vehicles, including a mandate for manufacturers to sell a certain proportion of Zero Emission Vehicles (ZEVs) each year.

Zero Emission Vehicle mandate

• Building on the public consultation on the Government’s Decarbonisation Plan published earlier this year (see our previous post on the consultation here: https://riskandcompliance.freshfields.com/post/102h4cz/decarbonising-transport-uk-government-seeks-views-on-a-new-emissions-framework), the Government plans to introduce a new ZEV mandate which will require manufacturers to sell a certain portion of ZEVs per year. The exact details of the mandate have not yet been provided – for example, it remains unknown what proportion of electric vehicles will need to be sold by manufacturers each year. However, it now seems that the proposed mandate will reflect “Option 2” as outlined in the Government’s initial consultation, which involves the introduction of ZEV sales targets that work on a credit based system, where manufacturers earn credits for selling and registering ZEVs and must hold sufficient credits at the end of each year to satisfy government mandated targets. Under Option 2, this credit-based system would exist alongside separate parallel CO2 targets.
• A further consultation is due to be published early next year, which will seek views on the proposed design of the ZEV mandate and associated CO2 emissions regulation. The consultation paper is expected to outline in greater detail how and when these sales targets will be enforced, and the penalties that will be faced by manufacturers for failure to meet such targets.

Ending sales of new petrol and diesel vehicles 

• The Strategy emphasises the Government’s commitment to end the sale of new petrol and diesel cars and vans by 2030. This ban is planned to extend to hybrid vehicles by 2035, so that all new cars and vans must be zero emission at the tailpipe from 2035.
• Between 2030 and 2035, the Government plans to implement rules to facilitate the transition towards all new cars and vans being zero emission at the tailpipe. During this transition period, new cars and vans will only be able to be sold if they offer “significant zero emission capability”. In practice, this means that whilst the sale of new hybrid cars will still be permitted during this period, they will need to meet the Government’s requirements for significant zero emissions capability. Details of how this capability will be defined have not yet been provided, contributing to greater uncertainty for manufacturers and consumers. It is expected that the Government will introduce a framework outlining the criteria a vehicle must meet to be deemed as having “significant zero emissions capability”.

Funding commitments 

• The Strategy outlines the Government’s commitment to providing additional funding to support ZEVs.  An additional £620 million will be allocated to spend on grants for electric cars and infrastructure. The Government has also committed £350 million to support the electrification of UK vehicles and their supply chains, alongside continued investment to ensure that the UK is at the forefront of development and industrialisation of ZEV technologies. The industry has generally welcomed this additional funding, but concerns persist that plans for developing a supportive regulatory framework to ensure the development of accessible nationwide charging infrastructure remain inchoate.
• Whilst the Strategy outlines commitments to provide this funding, no specific information is given on how this funding will be allocated and used. An official plan is due to be released later this year, setting out the key roles the public and private sectors will need to play to support the roll-out of ZEV infrastructure.   

Next steps

Whilst the new Net Zero Strategy gives some indication of the Government’s planned direction on ZEVs, a number of critical questions remain unanswered for manufacturers and consumers. Details are yet to be provided on how the ZEV mandate will be implemented, and on how additional funding will be meaningfully distributed to aid the infrastructure required to support the planned surge in ZEVs on the roads.

Whilst this most recent development is welcome, clearly the proposal will require further development if the automotive industry is to most effectively collaborate with Government in order to accelerate toward transport decarbonisation.